Age 29: General Budget and Finance Questions

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Topic Author
erikill
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Joined: Wed Jan 05, 2011 2:13 pm
Location: GA

Age 29: General Budget and Finance Questions

Post by erikill »

Long time reader - first time posting.

Age:29
Tax Bracket: 28%
Tax filing status: Single
Net Pay: $2,643 semi-monthly (with 6% Roth 401(k) which may change) after all benefits

Living Situation: Purchased a single family home in GA in 2007 and travel a lot for work for 212K
Mortgage 1: 144K 15 year at 4.875% ($1237/month + $210 escrow)
Mortgage 2: 50K 15/30 balloon at 8.625% ($412/month)

Cash: $3.6K

Investments:
Brokerage - $3.4K
Roth IRA - $30K
Rollover IRA - $28K
Roth 401(k) - $10.2K fully vested (work matches 40% up to 6% with 5 year vesting period)

Debt:
Student Loan 1 - $1.7K at 5% $42/month
Student Loan 2 - $17.7K at 1.875% $90/month
Student Loan 3 - $59K at 3.25% $220/month (NOTE: this is my parents loan for me that I am helping them pay back)
CC Debt - $5k at 9.99% (Just had to have a big repair on the house for the siding / repainted)

Monthly reoccurring:
Cell phone - $100/month
Gym - $35/month
Disability Ins - $50/month
Car Ins - $94/month
Blockbuster / Netflix - $30/month
Utilities - $300/month (TV, Cable, Power, Gas, Trash, Water)

A lot of my spending is just for food and travel (a per diem doesn't always cover my appetite) and living out of a suitcase.

So onto my refinance question - I purchased my home in May 2007 for 212K which seems to have been a big mistake because of the market crash. However, water under the bridge at this point. When I purchased the home I did 100% financing on a 75/25 mortgage which was 6% first, 8.625% second. I refinanced in June 2010 to a 15 year 4.875% mortgage after paying my car off.

Now here is what I've been toying with. I currently contribute 6% to my Roth 401(k) which has a 40% match up to 6% and take 5 years to fully vest (20% per year). I was thinking about stopping contributing to the 401 (k) and instead taking that post tax money and throwing at the 2nd mortgage since it is a guaranteed rate there. This hurts my longer term retirement, but I plan to continue to put money into my Roth IRA (while I still qualify).

Now another thought was to take my Roth IRA contributions out and instead throw it at the 2nd mortgage. This should put me low enough to refi, which then I could goto a single 15-year mortgage but PMI and rates would depend on what the house appraises at. I think I might be at 95% LTV ($180K) after the refi / appraisal so looking at saving maybe 300/400 a month at best, but I also am no longer underwater with the house but I also got rid of ~40% (30K) of my retirement saving. I would continue to max my contribution until I no longer qualify.

Third thought was to leave everything alone and just keep paying off everything in order.

I'm open to any comments or speculations as needed.

--Erik
Last edited by erikill on Mon Jun 25, 2012 12:44 pm, edited 1 time in total.
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ShowMeTheER
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Re: Restructuring Thoughts on Mortgage

Post by ShowMeTheER »

Is the first now at 4.875% and the second still at 8.625%?

Which tax brackets are you in?

Any contributions to pre-tax 401(k) or all Roth?

Hard to give answers with only the info you've given so far... there is more to consider.
Topic Author
erikill
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Location: GA

Re: Restructuring Thoughts on Mortgage

Post by erikill »

Correct the first mortgage is 4.875% and the 2nd was subordinated but still at 8.625%.

I'm currently in the single 28% bracket based on gross income.

I have been doing all Roth 401K contributions although probably was not the smartest (but I was concerned about Roth IRA phaseout last year but I was ok).

I do have some other debt (a little CC, student loans) but rate wise the 2nd mortgage is highest behind the CC.
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ShowMeTheER
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Re: Restructuring Thoughts on Mortgage

Post by ShowMeTheER »

Given what is known, I'd suggest the following:

1) switch to pre-tax contributions; up to the company match. Do more if you are able, while considering the mortgage. I really don't see that you should be doing anything Roth until maxing out pre-tax items.
2) attack the second mortgage
3) if your financial situation allows pretty comfortably, look into paying mortgage down to 80% of appraisal and do a full refi. Effectively there, you are earning a very high level of return by eliminating a weighted average high interest rate for a 3%-ish refi.

Also, you might just consider a full budget review... not necessarily for this board, but in general make sure you are OK with where everything is going. At 28% bracket, you are making a good living, but that also means tax considerations should be at the top of your list. Consider state taxes too, if any. The Roth decision has me anxious for you! And, you mentioned 28% based on gross... double check your true bracket to be certain.
Topic Author
erikill
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Location: GA

Re: Restructuring Thoughts on Mortgage

Post by erikill »

I do have some state taxes (GA) which is 6% usually. I itemize everything under the sun to help reduce my tax liability. I'm not opposed to doing a full budget review, I use Excel and an aggregator (mint) to help me track how I'm doing but I just get so frustrated with the mortgage.

I can go ahead and switch the 401 (k) over to pre-tax. Should I just start a new thread for a budget review?
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ShowMeTheER
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Re: Restructuring Thoughts on Mortgage

Post by ShowMeTheER »

erikill wrote:I do have some state taxes (GA) which is 6% usually. I itemize everything under the sun to help reduce my tax liability. I'm not opposed to doing a full budget review, I use Excel and an aggregator (mint) to help me track how I'm doing but I just get so frustrated with the mortgage.

I can go ahead and switch the 401 (k) over to pre-tax. Should I just start a new thread for a budget review?
I'd say edit your original post to follow the standard format... with your mortgage and other questions at consolidated at the end of the post. This will help members see your full financial picture more clearly and be able to offer other advice that can't yet be said.

Pull prior year fed/state tax returns as well to have them handy. Jeez, just looked at GA state brackets... interesting setup, but you are correct at 6%.
Topic Author
erikill
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Location: GA

Re: Age 29: General Budget and Finance Questions

Post by erikill »

K updated and I have everything handy with TurboTax online. Also I agree the GA brackets really are if you make any money you pay 6%.
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NorCalDad
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Re: Age 29: General Budget and Finance Questions

Post by NorCalDad »

Welcome, Erik.

At first glance, I'd say you need more cash on hand for an emergency fund, unless you're asking your Roth IRA to do double duty there. The fact that you had to borrow to make a house repair tells me you probably should start trying to build up your cash savings more.

I would hesitate to raid your retirement accounts. As you approach age 30, that $70k seems like right around the amount to have, but certainly not so large an amount where you should feel comfortable about withdrawal. As noted above, a problem I have with emptying your Roth is that your Roth looks like your emergency fund absent cash savings.

I think it's respectable that you're paying back your parents' loan for your college costs, but is there any way you can get some flexibility with them? Perhaps they can let you apply that $220/month toward your higher-interest debt while you owe them the loan at 3.25%?

If I were you, I'd look for every opportunity to tighten your belt in the next year. I would switch your 401(k) over to traditional to at least get the max company match, which should also free up some money in your paycheck because you'd owe less in taxes. I'd empty the brokerage account and apply that to the credit card debt. And I'd see if your parents can help you out on that loan. Re-evaluate in a year and see where you are on the second mortgage. Maybe interest rates are higher, but they will probably still be low compared to 8.6% and even 4.9%.
Topic Author
erikill
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Re: Age 29: General Budget and Finance Questions

Post by erikill »

Thanks - I know I'm bad about saving and need to. I kind of felt after the repairs having to carry a balance that I needed to see where I could start saving. Right now the ROTH is the emergency fund, and the brokerage is more of play savings (it's all in a 6.5% DRIP fund). I already ran a calculator on switching to a pre-tax 401(k) and that should bring in an additional 2K a year which I will throw at the CC first (then 2nd mortgage). So you would agree then to still utilize the brokerage against the CC?

In terms of the third student loan, my parent's are not able to afford to pay it at all. My dad lost his job a few years back and I took over 100% on the repayment (and is now retired and collecting SS).

I am trying to definitely cut where I can (switched my TV/internet provider and saving 60/month there). The issue w the second is since I am underwater they won't refinance it and why I was interested in dumping the Roth to try and get above water and refi.
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englishgirl
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Re: Age 29: General Budget and Finance Questions

Post by englishgirl »

I think you need to look at your spending to free up some money to pay down the debts.

Why are you not able to live within a per diem if you are traveling? Especially if you are traveling for work. Book into a hotel which has a kitchenette in the room, and/or free breakfast. Then you can either prepare your own meals (when you do not have to eat out), or at least load up on free food in the morning.

Also, $30 for Blockbuster and Netflix? AND you're paying for cable? Seems like you could find a way to get the entertainment you want for less money. Are the channels/programs that you like available on internet streaming services such as Hulu? Or on their own website (like Comedy Central).
Sarah
Topic Author
erikill
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Location: GA

Re: Age 29: General Budget and Finance Questions

Post by erikill »

englishgirl wrote:I think you need to look at your spending to free up some money to pay down the debts.

Why are you not able to live within a per diem if you are traveling? Especially if you are traveling for work. Book into a hotel which has a kitchenette in the room, and/or free breakfast. Then you can either prepare your own meals (when you do not have to eat out), or at least load up on free food in the morning.

Also, $30 for Blockbuster and Netflix? AND you're paying for cable? Seems like you could find a way to get the entertainment you want for less money. Are the channels/programs that you like available on internet streaming services such as Hulu? Or on their own website (like Comedy Central).
I don't disagree my spending is my biggest offender. My per diem is based on clients not the IRS rates, so in some cases I may only get $30/day (in metro NY) and that can't cover the meals. I'm trying now to goto the grocery store to buy breakfast type foods. In terms of where I stay it's dependent on the clients and coworkers which is usually a Courtyard (they used to have free breakfast now it's pay). But also add in coffee breaks / snacks (which I do get from the grocery store) it's easily $50 a day plus during the airport trips getting outrageous costs on food/drinks (or more if I'm delayed). I'm trying to get get staffed locally so I can get on more of a standard budget and expenses.
/side bar* One problem too is when we go out after work clients expect you to pay, but we can't expense it so I have been using the gym as a convenient way to get out of that, it's unfortunate though because it does build good comradery *side bar/

I got Netflix originally for a lot of the Showtime TV shows, then they got rid of them. Blockbuster I was using for DVD movies to bring with me (plane rides / hotel), and since the total access stuff stinks, I'm considering cancelling the service and sticking with only Netflix. I did switch to U-verse which I think will let me stream my media so I may not necessarily need Netflix either now. Most of the media I watch are all HBO, Starz, Showtime shows so it's trying to figure out the way to get to watch that.
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Khanmots
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Re: Age 29: General Budget and Finance Questions

Post by Khanmots »

I'm not familiar enough with refinancing options, to provide good advice, but having that as a long-term goal would be a good idea. Have you looked into HARP? (I'm not too familiar with the requirements)

If I was in your shoes I think that I'd
1) Switch to the regular 401k
2) Cut costs - see below
3) Pay off the CC debt - consider liquidating the taxable brokerage account (depending on cost basis)
4) Significantly increase the emergency fund.
5) I may get some flak here, but I'd then pay off Student Loan #1. It's small, has a significant interest rate, is non-dischargable, and paying it off will free up cash-flow out of proportion to it's size (compared to the other loans)
6) If you aren't able to refi without 20% equity, then focus on paying off the second mortgage until you can

If your cell contract is close to up you may be able to shave a little there. (cutting it to $70-80 a month would free up a few hundred a year)
I'd consider cutting cable, especially if you're traveling so much and have Blockbuster/Netflix. Might cut to just one of those as well. Maybe do some thinking about how many hours you really watch each one and figure out what you're paying on an hourly basis.... I haven't had cable since I did that :P
You may want to shop around on car insurance. I've got a small-displacement but sporty car with far more than the minimum coverage and it was running me less than that when I was your age and it was 3 years old (Acura RSX-S). If nothing else you may be able to switch to paying it on a 6-month or yearly basis and see a discount as many insurers charge a premium for allowing you to pay monthly. If the disability insurance is a private policy you'll want to look into paying yearly with the disability insurance as well; I know this was the case for mine.
And it may be quite educational to take your last month or two and itemize everything. See just how much starbucks or whatever runs when you project it out for the year. Can serve as quite the incentive to cut back on some things :wink:

For eating on travel... you might consider hitting a grocery store for sandwich makings. Not only will it be cheaper but it'll also allow you more flexibility in lunch if you have situations where you're supposed to be ready to work at a moments notice whenever the VIP or whoever decides to show up... not that I've ever had that :mrgreen:
Topic Author
erikill
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Re: Age 29: General Budget and Finance Questions

Post by erikill »

Khanmots wrote:
You may want to shop around on car insurance. I've got a small-displacement but sporty car with far more than the minimum coverage and it was running me less than that when I was your age and it was 3 years old (Acura RSX-S). If nothing else you may be able to switch to paying it on a 6-month or yearly basis and see a discount as many insurers charge a premium for allowing you to pay monthly. If the disability insurance is a private policy you'll want to look into paying yearly with the disability insurance as well; I know this was the case for mine.
Thanks for the other advice, I think at this point it may be better served to liquidate the DRIP fund and pay down the CCs. I'm sort of stuck since I had 2 claims against the house in 2010, one was bad hail damage and one was water damage (a pipe leaked) so I'm stuck with my insurance company since I do a double policy. Unfortunately they keep jacking up my car rates, which makes no sense to me.

I just did a contract w U-verse since it was finally available and with the cashback for switching it's not too bad per month. I pretty much only watch movie channels at home / DVR sports. I think my odds are pretty good (75/25) to getting staffed locally with my project ending on Friday so at that point I think I can get rid of Netflix / BB (and then throw that 600/yr at something else). Which is why I started this post, getting on a consistent budget will definitely help a ton!

I think part of my mistake was never getting roommates and living alone so I've not hedged the cost of living very well, but I can tell you the no-headache from no-roomies has to be worth something! :-)
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englishgirl
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Re: Age 29: General Budget and Finance Questions

Post by englishgirl »

For budgeting, you might enjoy playing around with a site such as mint.com. It really helps you identify where the money is going as it does all the itemizing for you.

As for travel food - I'd be thinking Starbucks via, packets of nuts, and other things you can easily pack with you. Starbucks via works out to 60 cents a cup if you buy in bulk from Amazon, and it's just as good as a regular Starbucks in my opinion. Take a travel mug with you, and then all you need is to get hold of some milk/creamer - easily purchased from a drug or grocery store, provided you've got a mini bar or office fridge to store it in.

Maybe call around about a new car insurance policy. If you keep the house insurance with the same people, maybe you can save money if you disentangle the car insurance and go somewhere else.
Sarah
Khanmots
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Re: Age 29: General Budget and Finance Questions

Post by Khanmots »

erikill wrote:I'm sort of stuck since I had 2 claims against the house in 2010, one was bad hail damage and one was water damage (a pipe leaked) so I'm stuck with my insurance company since I do a double policy. Unfortunately they keep jacking up my car rates, which makes no sense to me.
The discount for combined coverage might be less than you think; costs nothing to get a quote from Amica or some such. (And who knows, might be worthwhile to price homeowners while you're at it!)
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tyrion
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Re: Age 29: General Budget and Finance Questions

Post by tyrion »

If I read this correctly, you make $5286 montly, post-tax and after 6% Roth 401k contribution and all health care contributions.

After your fixed expenses, you have $2676 left over for gas, food, and fun. That's a lot of money, almost $100/day. I would definitely analzye your expenses and get a handle on them. Eating out, drinks, etc.
ShowMeTheER
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Re: Age 29: General Budget and Finance Questions

Post by ShowMeTheER »

28% bracket starts at about $85,000 for single. Is the salary you gave gross minus just benefits, or net of all benefits and taxes? If the former, I'm thinking you are in the 25% bracket. With your state tax and mortgage interest, you are getting a hefty Sch A deduction... plus maybe some other business write-offs.

But regardless...

Bad news is that mortgage is a big piece of your expenses, but good news is that you are still plenty on the positive side of cash flow. Your expenses aren't outrageous - some room to cut but nothing incredibly over the top.

It doesn't look like you are in position right now to pay to 80% on the house, but like others have now said - work on pieces of debt at a time and be diligent. Get to a $0 CC balance and keep it that way. Keep contributing at least to the company match for pre-tax 401(k). No more Roth in the near future. Get a solid emergency fund in place and attack the 2nd mortgage next. Go through your taxes in detail so you are aware which interest is deductible in your case... and therefore what it really costs you.

Realistically, probably a 12-24 month window for to get in a stronger position where you could have more options with the house based on your financials. A refi will make a significant difference when you can get there.
Topic Author
erikill
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Re: Age 29: General Budget and Finance Questions

Post by erikill »

ShowMeTheER wrote:28% bracket starts at about $85,000 for single. Is the salary you gave gross minus just benefits, or net of all benefits and taxes? If the former, I'm thinking you are in the 25% bracket. With your state tax and mortgage interest, you are getting a hefty Sch A deduction... plus maybe some other business write-offs.
The amount listed is net take home, which is why I do try to itemize everything I can at this point to help with additional writeoff. Would you say it might be better to go at the 5% student loan since in theory I can't take any deduction for it whereas the mortgage 2 I can (as someone previously suggested). Also when u say no more Roth, you just mean 401(K)? I was planning to contribute the maximum I can again this year to my Roth IRA.

I have started using mint.com for a lot since as I was saying I was feeling like this shouldn't make sense with me (but spending way too much now).

But as a takeaway so far on the advice:

1) Changed Roth 401(k) to traditional which based on a calculator I found should add 160/month positive cash flow. Will use this first on the CC, then next on the 2nd mortgage
2) Cash out my brokerage DRIP fund (SPHIX for anyone who is interested) and then take that and pay down the CC
3) Cut expenses down (hopefully being local will help me save some $$ on drinks/food) and then determine based on that what to put away after the CC is completely paid off (maybe 50/50 savings and 2nd mortgage?)

Glad to finally get to be more involved in the website
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Duckie
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Re: Age 29: General Budget and Finance Questions

Post by Duckie »

erilill, you make $210K a year. Taxes take about a third, so you should have around $130K left over (before retirement contributions of around $12.6K). You wrote your net pay was $2.6K semi-monthly which is $62K yearly. Where is the rest of the money? Or did you mean net pay after taxes, retirement, and all fixed expenses (which are currently $34K)? That still leaves a shortfall. Something is missing.

My recommendations:
-- Continue to contribute to the 401k up to the match. It's good you switched to the regular 401k. Don't contribute any extra for retirement until Mortgage 2 is paid off.
-- Pay off the $5K credit card debt first. Then Student Loan 1 just to get rid of it. Then seriously attack Mortgage 2.
-- Get your emergency fund up to at least $10K. $20K would be better.
Carl53
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Re: Age 29: General Budget and Finance Questions

Post by Carl53 »

Stick with hitting the CC and 2nd mortgage. With you grossing on the order of 100K and in the 28% bracket, the 2nd mortgage is still about 6.2% after taxes so much better to work on than the student loan. Also, knocking off the 2nd, or at least reducing it substantially will get you in position to get a conventional refi with 20% equity sooner.

Regarding roommates, you might be able to be selective enough to rent out a bedroom or two for a period of time. My son took this route without too much drama and covers about 2/3 of hia mortgage/escrow and utilities.
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erikill
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Re: Age 29: General Budget and Finance Questions

Post by erikill »

Duckie wrote:erilill, you make $210K a year. Taxes take about a third, so you should have around $130K left over (before retirement contributions of around $12.6K). You wrote your net pay was $2.6K semi-monthly which is $62K yearly. Where is the rest of the money? Or did you mean net pay after taxes, retirement, and all fixed expenses (which are currently $34K)? That still leaves a shortfall. Something is missing.

My recommendations:
-- Continue to contribute to the 401k up to the match. It's good you switched to the regular 401k. Don't contribute any extra for retirement until Mortgage 2 is paid off.
-- Pay off the $5K credit card debt first. Then Student Loan 1 just to get rid of it. Then seriously attack Mortgage 2.
-- Get your emergency fund up to at least $10K. $20K would be better.
The $2.6K is my net takehome pay (after taxes, 401(k), HC, etc) I wish I was up to $200K a year.. Soon lol.

Maybe it was the lack of coffee today, but when you are saying
Don't contribute any extra for retirement until Mortgage 2 is paid off.
does that include my $5K contribution to my Roth IRA as well? I do take some $$ every month to essentially keep funding it. I could immediately switch that to CC debt and then student loan 1 / then mortgage 2 to get some waterfall action.

And for the emergency fund, do you recommend like I was doing just a DRIP MTF fund, or just leave it in a .001% money market?
Carl53 wrote:
Regarding roommates, you might be able to be selective enough to rent out a bedroom or two for a period of time. My son took this route without too much drama and covers about 2/3 of hia mortgage/escrow and utilities.
I did have two roommates when I first got the house in 2007, both turned out to be deadbeats (one was a former friend) and had to take one to court. Since then I've pretty much been against the drama but it would of course be in essence free money to throw at the mortgage.
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Carl53
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Re: Age 29: General Budget and Finance Questions

Post by Carl53 »

erikill wrote: does that include my $5K contribution to my Roth IRA as well? I do take some $$ every month to essentially keep funding it. I could immediately switch that to CC debt and then student loan 1 / then mortgage 2 to get some waterfall action.

And for the emergency fund, do you recommend like I was doing just a DRIP MTF fund, or just leave it in a .001% money market?
I would recommend your Roth IRA contributions be directed to the loans. I realize if you are single you may soon be over the income limit, but there are ways around it such as backdoor IRAs if you become better able to fund it in the future. You are paying 28% plus 6% plus SS on funds used to make those contributions. Down the road you might marry, and if so realize a drop in marginal tax bracket at that time due to joint filing. Also, it is not very likely that you will be in that high of a bracket once you retire.

Re your E fund, look around for a decent rewards checking account or savings account. You should be able to find some that pay 1%.
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erikill
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Re: Age 29: General Budget and Finance Questions

Post by erikill »

Carl53 wrote:
erikill wrote: does that include my $5K contribution to my Roth IRA as well? I do take some $$ every month to essentially keep funding it. I could immediately switch that to CC debt and then student loan 1 / then mortgage 2 to get some waterfall action.

And for the emergency fund, do you recommend like I was doing just a DRIP MTF fund, or just leave it in a .001% money market?
I would recommend your Roth IRA contributions be directed to the loans. I realize if you are single you may soon be over the income limit, but there are ways around it such as backdoor IRAs if you become better able to fund it in the future. You are paying 28% plus 6% plus SS on funds used to make those contributions. Down the road you might marry, and if so realize a drop in marginal tax bracket at that time due to joint filing. Also, it is not very likely that you will be in that high of a bracket once you retire.

Re your E fund, look around for a decent rewards checking account or savings account. You should be able to find some that pay 1%.
Ok makes sense, that is true that the Roth IRA is really a worse tool sometimes when you look at all the tax liability (especially since my bracket is only going to keep going up until I retire).

Hmm really 1%, I'll have to look around for that - so you don't think doing a DRIP would be worth it (even after the tax liability?).
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Carl53
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Re: Age 29: General Budget and Finance Questions

Post by Carl53 »

erikill wrote: Hmm really 1%, I'll have to look around for that - so you don't think doing a DRIP would be worth it (even after the tax liability?).
The biggest problem with the DRIP would be that it is your Emergency Fund. You may need it with little notice. As with any equities, you very well may experience a loss of principal due to market fluctuations at the very time you need it. For this reason I'm not a huge fan of using a Roth that is 'invested' in securities that have a chance of losing very much as an acceptable E fund alternative.
Khanmots
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Re: Age 29: General Budget and Finance Questions

Post by Khanmots »

What I'm doing with my E-Fund is slowly transferring it into I bonds. Once you're past a year you can redeem at any time for a relatively minor penalty, and after 5 years no penalty at all. Not what I'd suggest for right now, but down the road once you get your efund fully funded you might start moving 20-25% of it into I bonds each year (so if an emergency does hit you're not left with your entire efund in that under 1-year period)
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Duckie
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Re: Age 29: General Budget and Finance Questions

Post by Duckie »

erikill wrote:Living Situation: Purchased a single family home in GA in 2007 and travel a lot for work for 212K
Okay, the 212K is where I got the figure $210K. My mistake.
[W]hen you are saying
Don't contribute any extra for retirement until Mortgage 2 is paid off.
does that include my $5K contribution to my Roth IRA as well?
Yes. Your debt interest is high. The Roth IRA can wait.
And for the emergency fund, do you recommend like I was doing just a DRIP MTF fund, or just leave it in a .001% money market?
You put it in a savings account, money market account, or CDs. It's not supposed to make money, it's supposed to not lose money. Stocks and bonds can drop at just the wrong time.
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Watty
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Re: Age 29: General Budget and Finance Questions

Post by Watty »

Have you looked into HARP?

+1

That is the first thing you need to know before you can decide what to do.

Tax Bracket: 28%
Tax filing status: Single
Single people get into he higher tax brackets pretty quickly. If you are likely to get get married and maybe have kids then you may be in a lot lower tax bracket then which would be a better time for a Roth. If you put the money into a deductable account now you may be able to roll it into a Roth when you are in a lower tax bracket.
NorCalDad
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Location: Northern California

Re: Age 29: General Budget and Finance Questions

Post by NorCalDad »

He will not qualify for HARP under current restrictions because he refi'ed his first mortgage in 2010. The cutoff was May 2009.

I agree that you should redirect your Roth IRA contributions going forward to debt paydown, in addition to the other measures I suggested earlier (except for asking your dad to help out on the student loan, which sounds like it's not possible).
Topic Author
erikill
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Joined: Wed Jan 05, 2011 2:13 pm
Location: GA

Re: Age 29: General Budget and Finance Questions

Post by erikill »

Thanks guys for the clarification. I'll go ahead and stop funding the Roth and move that over to knock out the CC debt then mortgage 2. One thing I slept on was if I should knock out that student loan 1 before mortgage 2, or just keep paying it off normally? It seems that I should attack mortgage 2 first with the higher interest rate and the ability to get into a better refi sooner.

Now for the e-fund I'll be good and use something FDIC insured and shop around for a good return. I have stuck with everything usually in Fidelity, unless you have some recommendations?
Single people get into he higher tax brackets pretty quickly. If you are likely to get get married and maybe have kids then you may be in a lot lower tax bracket then which would be a better time for a Roth. If you put the money into a deductable account now you may be able to roll it into a Roth when you are in a lower tax bracket.
Yea that assumes I want to get married or someone will marry me hah. Traveling a lot is not the lifestyle many people like to start up a new family.
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HelenaJustina
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Re: Age 29: General Budget and Finance Questions

Post by HelenaJustina »

Have you been working out of New York for long? Even if you're just commuting in for client work, you will still receive a NYS w2, and at a pretty high whack, too. Keep that in mind when tax planning.
Topic Author
erikill
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Joined: Wed Jan 05, 2011 2:13 pm
Location: GA

Re: Age 29: General Budget and Finance Questions

Post by erikill »

Almost 2 years, I did get a w-2 last year and NYS state taxes are much higher and more complicated than GA. Although again using the traditional 401 (k) that should help some with the tax liability there.
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HelenaJustina
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Re: Age 29: General Budget and Finance Questions

Post by HelenaJustina »

erikill wrote:Almost 2 years, I did get a w-2 last year and NYS state taxes are much higher and more complicated than GA. Although again using the traditional 401 (k) that should help some with the tax liability there.
My husband did this for a long time too, and our one regret was not going to the company and requesting compensation for the tax hit. It's no fun paying NY tax on a midwest salary. At least if they had moved the family out there I would have had access to better sushi 8-)
aubpri
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Re: Age 29: General Budget and Finance Questions

Post by aubpri »

Not sure if someone else posted it but a quick heads up on the cc rate, you could act quickly before June 30 and take advantage of PenFeds balance transfer with no transfer fee and lock that rate in for 4.99% while you pay it off. Would save you a good bit in interest expenses while you get the balance down to $0


Here ya go..... https://www.penfed.org/Platinum-Cash-Rewards/
Topic Author
erikill
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Location: GA

Re: Age 29: General Budget and Finance Questions

Post by erikill »

HelenaJustina wrote: My husband did this for a long time too, and our one regret was not going to the company and requesting compensation for the tax hit. It's no fun paying NY tax on a midwest salary. At least if they had moved the family out there I would have had access to better sushi 8-)
Funny thing you say this is my company is supposed to at the last paycheck of the fiscal year to give me a "bump" to made up for any additional tax liability. I'm pretty sure last year that didn't happen, nor ever (with my previous firms working out of town). At least they paid for the additional filling fees for TurboTax.
aubpri wrote:Not sure if someone else posted it but a quick heads up on the cc rate, you could act quickly before June 30 and take advantage of PenFeds balance transfer with no transfer fee and lock that rate in for 4.99% while you pay it off. Would save you a good bit in interest expenses while you get the balance down to $0

Here ya go..... https://www.penfed.org/Platinum-Cash-Rewards/
Wouldn't this be worse longer term to do this since the rate is 9.99% and what would the credit impact, etc be?
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aubpri
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Re: Age 29: General Budget and Finance Questions

Post by aubpri »

aubpri wrote:Not sure if someone else posted it but a quick heads up on the cc rate, you could act quickly before June 30 and take advantage of PenFeds balance transfer with no transfer fee and lock that rate in for 4.99% while you pay it off. Would save you a good bit in interest expenses while you get the balance down to $0

Here ya go..... https://www.penfed.org/Platinum-Cash-Rewards/
Wouldn't this be worse longer term to do this since the rate is 9.99% and what would the credit impact, etc be?[/quote]

It's my understanding that the amount transferred is locked in to the 4.99% until paid off. Only new money is at the 9.9% rate. So pay off the old balance at a lower rate and then pay off any new charges at the end of each month and don't carry a balance
Topic Author
erikill
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Location: GA

Re: Age 29: General Budget and Finance Questions

Post by erikill »

Hi guys - I'd like to do another check up a year later (and I do have another question):

Age:30
Tax Bracket: 28%
Tax filing status: Single
Net Pay: $3,100 semi-monthly (with 6% 401(k) with 50% match) after all benefits

Mortgage 1: 178K 15 year at 3.125% ($1250.76/month + $210 escrow + $85 PMI)
Gift repayment: 7.8K at 875 /month (helped to allow me to refi)

Cash on hand: $6K

Investments:
Brokerage - $0
Roth IRA - $36K
Rollover IRA - $31K
OLD 401(k) - $23k ($21k vested)
New 401(k) - $600 (just started the new job)

Debt:
Student Loan 1 - $1.2K at 5% $42/month
Student Loan 2 - $16.8K at 1.875% $90/month
Student Loan 3 - $58K at 3.25% $220/month (NOTE: this is my parents loan for me that I am helping them pay back)
CC Debt - $3.7k at 0% paying $600 /month (had to use a BT to pay on a repair for the house)

Monthly reoccurring:
Cell phone - $95/month
Gym - $35/month
Disability Ins - $50/month
Utilities - $225/month (TV, Cable, Power, Gas, Trash, Water)

I think I've put myself in a much better position (prepaying the auto insurance, changing to a different tv provider, cutting out some vanities) to really get a good positive cash flow. Plus this new job I just took got me a nice raise to help me start to think about what's next.

So my 2 questions going forward are:

1) With around $500 or more a month of free cash flow is it better to pay down the debt, or invest into MTFS or some REITs with 10% + dividend yields?
2) Is it worth rolling my 401k over, I have a good cost basis in it, and seems to be no fees to leave it alone. Since it is both a Roth and trad 401k - I could roll it into my other accounts no problem. However, the issue is the reinvesting. What do you guys think?

Thanks again, I hope to post again next year with again great progress.
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ddunca1944
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Re: Age 29: General Budget and Finance Questions

Post by ddunca1944 »

Debt:
Student Loan 1 - $1.2K at 5% $42/month
Student Loan 2 - $16.8K at 1.875% $90/month
Student Loan 3 - $58K at 3.25% $220/month (NOTE: this is my parents loan for me that I am helping them pay back)
CC Debt - $3.7k at 0% paying $600 /month (had to use a BT to pay on a repair for the house)

I think I've put myself in a much better position (prepaying the auto insurance, changing to a different tv provider, cutting out some vanities) to really get a good positive cash flow. Plus this new job I just took got me a nice raise to help me start to think about what's next.

So my 2 questions going forward are:

1) With around $500 or more a month of free cash flow is it better to pay down the debt, or invest into MTFS or some REITs with 10% + dividend yields?
2) Is it worth rolling my 401k over, I have a good cost basis in it, and seems to be no fees to leave it alone. Since it is both a Roth and trad 401k - I could roll it into my other accounts no problem. However, the issue is the reinvesting. What do you guys think?

Congrats on the new job - and on improving your cash flow...
I'd be inclined to knock off that SL #1 ($1200 @ 5%).
How long is the CC debt at 0%? Can you pay it off before the 0% expires?
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Duckie
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Re: Age 29: General Budget and Finance Questions

Post by Duckie »

erikill, first pay off that 5% student loan. Then save that extra $500 a month until you have an emergency fund of at least six months expenses.

How much are you planning to contribute each year to your new 401k (how much is 6%) and your Roth IRA?

What are the options (including expense ratios and ticker symbols) of your new 401k? Does it allow incoming rollovers from old 401k plans? From rollover IRAs?
Topic Author
erikill
Posts: 49
Joined: Wed Jan 05, 2011 2:13 pm
Location: GA

Re: Age 29: General Budget and Finance Questions

Post by erikill »

ddunca1944 wrote: Congrats on the new job - and on improving your cash flow...
I'd be inclined to knock off that SL #1 ($1200 @ 5%).
How long is the CC debt at 0%? Can you pay it off before the 0% expires?
CC debt is fixed at 0% until Jan 2014 (so Feb billing cycle). I was kind of thinking the same thing that the 1200 is the highest interest rate now and to just wipe it out.
Duckie wrote: erikill, first pay off that 5% student loan. Then save that extra $500 a month until you have an emergency fund of at least six months expenses.

How much are you planning to contribute each year to your new 401k (how much is 6%) and your Roth IRA?

What are the options (including expense ratios and ticker symbols) of your new 401k? Does it allow incoming rollovers from old 401k plans? From rollover IRAs?
I did open a CMA account with Fidelity to setup the E-fund, but I was thinking though to invest it partially into something that will really help it grow (like a REIT or a high yield bond fund).

Right now 6% will be around 6.9K a year, and I was thinking I should probably contribute some to my Roth if it makes sense to (based on your suggestions).

I believe it does, but the only issue is the funds aren't the best. In the past I've just rolled over into my traditional IRA and then just picked whatever MTF I felt like.
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